How to Start a Business Bank Account for Real Estate Investing

Setting up a bank account

This is part two of my investor series, are you interested in investing in real estate but don’t know where to start, this post may be for you! My first post covered setting up an LLC so if you haven’t read that, you may want to start there. After setting up your LLC your next step is to establish a business bank account and structure your accounts to efficiently manage your business finances. It’s important to handle this early on because when business starts rolling in, you’ll want to have your systems in place to keep you on track for success!

Select a financial institution

First, you will want to select a financial institution to hold your business bank account. I would select the bank you currently bank with or a local credit union with low fees and an app for easily accessing your banking information. To establish an account you will most likely need the Articles of Incorporation, Operating agreement and EIN from the IRS. If you are opening an account face to face, its best to print these documents in advance. If you are doing it online you should be able to upload the documents easily.

I learned to structure my business bank accounts through the book Profit first and could not recommend it enough! In the book, it states you should have five accounts. If you are able to name these accounts via the banking app, that will be easiest for keeping track of your finances when transferring funds and balancing accounts. The accounts are broken down by Profit, Salary, operating expenses, tax and incoming money. The book also suggest only transferring the money twice a month to better track expenses and use time more efficiently.

The breakdown

According to Profit first and what has worked well in my business, is breaking down the incoming money into my accounts by percentages. These percentages may vary but a good rule of thumb is, profit 10%, salary 40%, operating expenses 25% and tax 25%, of course this will vary based on individual business needs. Your incoming money account should have a balance of $0. You will want to make the operating expenses account a checking account with a Visa debit card attached for business expenses. If possible, make the incoming money account a checking as well because you are only allowed 5 money transfers a month online. In person transfers are unlimited, but who has time to bank at the branch any more? The rest of the accounts can be savings accounts since you will not be transferring money out as frequently.

Now that we have established an LLC and set up our bank account, it’s time to dive in to how to finance an investment property.

Contact me today if you have any question!